Home » Blog » How a line of credit could benefit your business

How a line of credit could benefit your business

A business line of credit provides fast, self-serve access to funds as and when they are needed, up to an approved amount limit. Here’s how a line of credit can help small businesses manage cash flow and power growth.

A business line of credit offers a convenient and flexible source of funding that lets you run your business on your terms, 365 days a year, for optimal peace of mind. For small business owners, it’s a great way to manage seasonal fluctuations, cover dips in cash flow or settle unpaid invoices.

How does a business line of credit work? 

A business line of credit is a facility that allows a business to ‘draw down’, or borrow an agreed amount of funds, up to a limit. 

When you take out a business line of credit, the first step is to determine the amount you want available to you. Once the amount is approved, you can draw down all or part of the available funds. 

Let’s say your retail business imports ceramics from overseas and wholesales them to local gift shops. In this example: 

  • You have obtained a $25,000 line of credit to help manage unexpected cash flow gaps when running your small business. 
  • When you receive a large order from a retailer, you can draw down $10,000 from the line of credit to purchase the goods you need to fill the order. 
  • Then, when the retailer settles its invoice, you can use these funds to pay back the $10,000. 
  • You only pay interest on the $10,000 for the time you used it. 

Find out more and apply for a Prospa Line of Credit.

As this example shows, a line of credit can offer business owners two major benefits:

1. Increased flexibility

You can access funds up to your approved facility limit, anywhere, anytime. Once the facility is open, you can use and reuse the funds as much or as little as you want, and decide for yourself how you use the funds – for wages, stock, equipment or whatever business expense you choose. 

When you use the Prospa customer portal, you can:  

  • draw down from your account up to your approved balance,  
  • pay bills, staff and suppliers,  
  • make purchases,  
  • schedule payments and set up recurring ones. 

When you draw down on your business line of credit, a minimum repayment schedule is established. You can also make additional repayments any time you like – or just the minimum – over a 24-month term, with the option to renew. And you only pay interest on what you use. 

2. Improved cash flow

A line of credit can help you stay in control of your business finances by providing flexible, ongoing access to funds, so you can confidently manage cash flow fluctuations. This could be a quiet month, the gap between purchasing materials and being paid for your work, or the time between paying for imported products and selling them 

Paying interest on just the funds you use could help regulate your cash flow and, if managed properly, reduce the cost of borrowing. 

Speak with one of our small business lending specialists about how a Prospa Line of Credit could help you achieve your business dream.

Primary CTA illustration
With Prospa’s fast application and decision, this time tomorrow you could have the funds you need to set your business up for success.
Apply today
Primary CTA icon
With Prospa’s fast application and decision, this time tomorrow you could have the funds you need to set your business up for success.

The information on this website is provided for general information only and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from financial, legal and taxation advisors. Although every effort has been made to verify the accuracy of the information as at the date of publication, Prospa, its officers, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy, or omission from the information for any reason, including due to the passage of time, or any loss or damage suffered by any person directly or indirectly through relying on this information.

Keep reading

Infographic: Line of credit vs small business loan

04 July 2022 | 3 min read

Business loans and lines of credit offer different advantages to small business owners looking to invest in growth or cover cash flow gaps. Here’s the rundown.

View more

What is a business line of credit?

06 June 2022 | 3 min read

We explain what a business line of credit is and how they can help small businesses bridge cash flow gaps, quiet periods, or stock purchases.

View more

3 things to consider before dipping into your personal savings

31 May 2022 | 4 min read

38% of small business owners plan to use personal savings for their businesses this year. We asked an accountant what they should consider first.

View more

Subscribe to the Prospa Blog

Be inspired! Sign up to Prospa’s newsletter to receive tips, tools and small business success stories straight to your inbox.